Most economists agree that the worst of this financial meltdown is now behind us. ..

The question is, what, if anything will we learn from this disaster? Already economists are subjecting their field to a long overdo critical review… (But) whatt if the problem isn’t economics? What if the problem is a business problem–a failure of management and an absence of leadership? Shouldn’t business and business schools be looking at their practices and precepts with the same critical eye as the economics profession?

What is the business of business school? And what is the purpose of business?

At least once per decade for the last 30 years we’ve seen American business go seriously off the rails. The reengineering fad, Mike Milken and junk bonds, the savings and loan crisis, the dotcom boom and bust, the Long Term Capital Management panic–only a partial, abbreviated history of business disasters–suggest that something systemic is wrong with the way business goes about business. An individual with this track record of crises would be a candidate for an intervention, a time out in a recovery center, and life-long participation in the 12-step program of their choice. Something is wrong–and it’s time to face it.

Business schools teach finance and strategy, marketing and HR, IT and operations management. Those are the courses of a trade school, not the developmental curriculum of a profession.

The first question business schools should teach their students to ask is my Rule #3: Ask the last question first. The last question is, what’s the point of the exercise? Jack Welch famously said it was to maximize shareholder value–a terrible answer in retrospect. Peter Drucker famously said it was to make and keep a customer. What is the answer that fits our situation in 2009, and beyond? Today, business schools need to teach students to ask the last question first–or risk taking their company down the old dead-end path.

The next piece of the curriculum has to be Rule #23: Keep two lists, one that holds what gets you up in the morning and one for what keeps you up at night. Managers and leaders have got to know themselves before they know their businesses. They’ve got to have passion for their work and concern for their world. Otherwise they’re just punching the time clock and risking everyone’s future.

Finally I’d teach Rule #4: Don’t implement solutions. Prevent problems. Everything that will be put in place as a clean up to the mess we’re in now won’t be enough if we keep creating new disasters. We need a new generation of business leaders who anticipate problems and prevent them from happening. It’s smarter, cheaper, and more effective than the every-ten-year clean up we’ve become accustomed to.

Every one of these three rules has two things in common. First, they cut across all the disciplines of traditional business school. They are ways of seeing the world, ways of making sense of everyday business realities.

Refreshing. It is indeed too easy to pop up 500 things, quite different to be able to say, “But here are the three (or five) that matter…”  Our clients would recognize that as one of our favorite reality checks.

We might not lose our way as easily if we stepped back to check the frame.  And perhaps see the larger frame, the newer context.   In 1987 few of us saw the proliferation of programmed trading vibrating into a collapse.  Should we have seen in 2007 how cantilevered derivatives were quickly straining beyond load limits and quickly into a global complexity? If you think you have problems on the coasts, try prying open the minds in the manufacturing corridors that are still locked into linear sensibilities, largely a product of their immersion in physical product processes and the management analogies they derive from that.

As a surgeon, he also spent his life fighting nature’s relentless law of entropy, and he’d take each patient’s case personally. Yet, in the end, after a week himself in the ICU and a week before he died, he chuckled at my asking what exactly happened, “ Well, you know, the parts are just old.”  Then for the umpteenth time that it had become a ritual, he asked teasingly about our sending my son Kent to live with them. Dad would have been 87 a week later.

Nature’s like its ocean’s perpetual cycle: perpetually evolving into greater complexities that then break down into elemental pieces.

Charles Perrow says that complexity reaches a level where catastrophic failure is not attributable to any single part but rather to factors created by that complexity itself. Perrow in 1984 published Accidents: Living With High Risk Technologies which the New York Times describes as, “a penetrating study of catastrophes and near catastrophes… writes lucidly…. An outstanding analysis of organizational complexity.” At a certain stage, accidents are “normal” – implication: plan for the inevitable.

In an earlier blog, I referred to how the government, and Wall Street and its quants, seem to never learn the humility that there will never be a final perfect solution. Each solution creates new problems. We need then to step back and hopefully see the new, unprecedented larger “frame” – the new context. Just as programmed trading is the likely cause of the 1987 breakdown in the financial markets, in 2007 there were a few lonely hairshirts warning us about “globalization”. At the time, there were a few voices critical of how the quants were creating actuarial fiction – as if risk can be eliminated by simply insuring against it. Each subsequent derivative layer became more and more abstract. There’s a specious optimism that the economy is saved after saving the largest players; that is simply a start, and the meltdown will take months yet to manifest its broad and deep spiral down into the lowest levels.

What’s the difference between risk-asset insurance, and social security, or the Ponzi-Madoff school for pyramidal architecture, or the Mr. Obama’s massive plans for health, education and alternative-energy spending? Denial is a river in Egypt, quips Dr. Temple Grandin. Pyramids, however, are obviously everywhere the alchemist in us thinks we can invent a perpetually self-renewing resource.

Well, I’d be the last to pretend I saw all this then. I know it’s not as easy as “weshouldaseenitcoming”. But I think the global meltdown argues for vigilance for a larger context, the next larger “frame”. Not just seeking answers, but questioning the question. Clearly delineating roles, where external auditors are not your management advisors; where business leaders aren’t their own regulators; where external and internal roles are kept separate; and, perhaps, in the swing from a free market having all the answers, to a presidential hubris in thinking government has all the answers.  Life is not a straight line; nor even a smooth curve.  I think we get closer to truth if we can accept that life is a jaggedy dialectic:that decision making is a continuing correction of the last decision – as pilots might describe flying.